SUNNYVALE -- Yahoo's (YHOO) pricey $1.1 billion purchase of the trendy social blogging site Tumblr is both a bold and risky move, which Yahoo CEO Marissa Mayer seemed to indirectly acknowledge Monday with repeated vows to "not screw it up."

Mayer is betting that Tumblr will give the struggling Internet giant a new opportunity to reach a growing audience of young and creative Internet users, while providing fresh material for Yahoo's own sites and helping the company's effort to build a much-needed presence on mobile devices and the social Web.

Logos of the brands Tumblr and Yahoo! (Fred DuFour/AFP Getty)

But analysts say Tumblr is an unproven platform for advertisers, whom Mayer must attract to justify her costly investment. Some pages are devoted to adult content, which major advertisers prefer to avoid. And Yahoo, under previous chief executives, has a poor track record with big acquisitions.

"GeoCities, anyone?" joked Brian Solis, a principal analyst at Altimeter Group, referring to a popular Web-hosting service that Yahoo bought for $3.6 billion in 1999 and later closed after few profits materialized.

Meanwhile, some loyal Tumblr users were already rebelling Monday, despite Mayer's promise that "our strategy is to let Tumblr be Tumblr" by having founder David Karp continue running it as an autonomous business unit based in New York.

Advertisement

"You ruined it Yahoo. I don't even want to use Tumblr if it's going to be run by you," wrote one Tumblr blogger whose screen name can't be printed in a family newspaper.

Similar complaints are often raised when a small and trendy service gets taken over by a much larger and older company. Mayer addressed those concerns by telling analysts, only half-jokingly: "While we are acquiring the business, we are making a sincere promise to not screw it up."

Analysts say Mayer faces real danger if she makes changes that jeopardize Tumblr's appeal to young, hip users who see it as a place to share irreverent musings, photos and creative visual work. "The big challenge for Yahoo will be figuring out how to balance their need to rapidly monetize Tumblr," said Forrester analyst Zachary Reiss-Davis, "without alienating the current users and causing them to leave."

By some estimates, Tumblr's $13 million in revenue last year covered only half its operating costs. Karp had long resisted putting ads on the site, although he recently began allowing some on the "dashboard" page where Tumblr members can follow other users and receive updates from various blogs.

Yahoo will expand Tumblr's 175-person staff and its technical infrastructure, while gradually introducing more ads, according to Mayer. But she said she agreed with Karp that ads on Tumblr should be "high-quality" messages that blend "seamlessly" with Tumblr's other content.

More than advertising, Mayer said she's counting on Tumblr to contribute new content and visitors to Yahoo's other sites. She said Yahoo will offer updates from Tumblr blogs to users' personalized news feeds on Yahoo's main pages.

Mayer told analysts that Tumblr has more than 300 million active users, which combined with Yahoo's 700 million users would give the company a reach of 1 billion. While there may be some overlap, she said the audiences are mostly complementary.

"Our users are older; theirs are the youngest of any site of this scale," Mayer said.

The research firm comScore estimated Tumblr's audience at 117 million in April. Experts said it's not uncommon for Internet companies to overestimate such numbers, while independent firms try to account for cases where the same person uses multiple Internet addresses or devices to access a site.

Analysts said the deal, which is Yahoo's largest acquisition in nearly a decade, could help Mayer jump-start a company that has fallen behind Google (GOOG) and Facebook in competing for advertisers. But some were skeptical.

"We see the relatively large $1.1 billion cash acquisition as risky and likely premature," wrote Carlos Kirjner of Sanford Bernstein, after noting that Yahoo is still struggling with other aspects of its business.

"There are lot of ways that Yahoo and Tumblr can win as a result of this transaction," said Scott Kessler of S&P Capital IQ. But he warned that Mayer may be giving up too much flexibility by promising not to interfere with Tumblr's operations.

Karp, who will reportedly earn $250 million from the sale, praised Mayer and Yahoo in a blog post Monday while promising Tumblr's values won't change. He ended the post with an enthusiastic, four-letter expletive.

Yahoo stock rose slightly Monday after the early-morning announcement of the deal. It closed at $26.58, up 6 cents for the day.

Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.